That’s Mock’s rough estimate of how much in liabilities he’d be able to take off the pension fund’s balance sheet by locking in higher monthly fixed-income coupon payments in the bond market so he can better match future payments to retirees.

While rising interest rates are usually bad for owners of bonds, Mock is among the legion of money managers challenged since the financial crisis by almost record low rates to generate positive returns. With the Bank of Canada and the Federal Reserve forecast to start raising rates next year, the power of pension funds to counter what Bank of America in 2011 called the “great rotation,” where bond values drop as investors switch to stocks, may be put to the test.

“Our losses on bonds on the asset side are absolutely dwarfed by the benefit we’re gaining on the liability side,” Mock said in an interview yesterday at Bloomberg’s Toronto office. “Interest rates go up 100, 150 basis points? We would be all over that.”

Mock, though eager to take advantage of rising rates, doesn’t see a big move any time soon. The government of Canada’s 10-year bond yielded 1.79 per cent at 8:56 a.m. in Toronto, not far from the record low of 1.57 per cent reached in July 2012. He doesn’t see it rising much more than 75 basis points, or 0.75 percentage point, over the next five years.

Economists are more bullish, calling for a more than 90 basis-point increase by the end of next year with the 10-year yielding 2.75 per cent, according to the median estimate of a Bloomberg survey conducted Dec. 5 to Dec. 10.

“We’re in a low-rate environment for longer than most people realize,” Mock said, citing aging populations in Europe, Japan’s campaign to boost inflation with monetary stimulus, and China’s slowing economy.

We’re in a low-rate environment for longer than most people realize

In the meantime, Teachers has benefited from investing in longer-maturity bonds as central banks piling on monetary stimulus drove a rally in the securities by pushing interest rates further down, he said.

In the Canadian bond market the longest-dated government securities have returned 20 per cent this year, better than all other maturities, and almost triple the returns on corporate debt, according to Bank of America Merrill Lynch data.

The rally may have further to run, with yields falling 25 basis points more, Mock said. For now though, he isn’t adding to his bond allocations, which make up about 41 per cent of the $141 billion in assets, preferring instead to wait until the rally’s over and rates start to move up.

“We’ve got more liabilities than we have bonds, so as rates go up it’s an opportunity to lock-in hedges against the liabilities,” Mock said. “We want to have lots of bonds.”